Jaime needs to buy a new refrigerator for his apartment. He found what he needed for $1,300 at a well-known appliance store. The store is offering two options for Jaime to finance the appliance: Option I:
A store credit card with a $1,500 limit:
1) The credit card charges 16.5% annual interest rate.
2) The minimum monthly payment is $100 plus the monthly finance charge.
3) No down payment required
4) The loan is expected to be paid off in 12 months to avoid additional penalties.
Option II: The appliance store offers an installment loan for his purchase: 1) Loan charges a simple interest rate of 12.5%.
2) Loan must be paid off in 12 equal payments to avoid penalties. 3) A $300 down payment is required.
A. Which Option should Jaime choose if he wants the interest he pays to be as small as possible?
B. How much interest paid will he save by choosing this option?